Fixed rate mortgage deals tumble to less than 1.1%

Some lenders’ interest rates below 1.15% on two-year fixed-rate mortgage loans, say Zoopla

Borrowing costs for banks and building societies have fallen in response to the coronavirus lockdown.

This has resulted in a respective dip in the cost of fixed-rate mortgage dealsn.

Best-buy two-year fixedrate mortgage deals have tumbled to below 1.15%.

HSBC is now offering a two-year fixed interest rate of 1.14% for people with a 40% deposit on their new home.

Several other lenders are offering two-year fixed-rate loans with interest rates of 1.19%.

Five-year fixed-rate loans are only slightly more expensive. HSBC is offering a deal of 1.36% for homeowners borrowing 60% of their property’s valuen.

10 other lenders are offering interest rates of 1.5% or less.

WHY ARE FIXED-RATE MORTGAGE DEALS DROPPING?

The average cost of twoyear and five-year fixed-rate mortgages fell to a record low in May.

This historic dip was the result of two emergency interest rate cuts by the Bank of England in response to coronavirus.

These cuts reduced the base rate to a record low of 0.1% in a bid to help the economy weather fallout from the pandemicn.

Although fixed-rate mortgages are not based on this rate, the fall in the officialcostofborrowinghad a knock-on impact on swap rates (when two different parties swap interest rates), upon which fixed rates are based.

Another reason behind the drop in fixedrate mortgage deals is competition.

The mortgage market remains highly competitive right now in a bid to combat the impact of coronavirus on the market.

Lenders have passed on this reduction in their own costs to new mortgage customers in order to keep activity moving.

WHO IS ELIGIBLE TO USE THE NEW MORTGAGE RATE DEALS?

While the most eye-catching rates are only available to people with at least 40% of their home’s value to put down, there are still good deals available for people with smaller depositsn.

Several lenders have rates of 1.25% or below on two-year fixed rate deals for those borrowing 75% of their home’s value.

Rates of 1.79% are also available for those borrowing 90%.

Homeowners with a 25% deposit who want the security of fixing their mortgage rate for five years can get interest rates starting at 1.46%.

Those with a 10% deposit can get interest rates of 2.16%.

Although it’s good news for borrowers that lowinterest rates are available right now, it’s important to factor in the total cost of a mortgage when taking one outn.

For example, although HSBC offers the lowest rate on a two-year fixedrate mortgage of 1.14%, the deal comes with a £999 application fee.

Generally, those with larger mortgages are better off paying a high application fee to secure a lower interest raten.

Those with smaller mortgages are better off going for a less competitive ratebutalowerarrangement feen.

Either way, it is important to work out exactly what a mortgage will cost you when searching for the best deal.